The Oakland Raiders held a party for the groundbreaking of the planned Las Vegas NFL Stadium, (supposedly) in partnership with the University of Nevada – Las Vegas, last night. While many were reportedly congradulating Raiders Owner Mark Davis, he was heard to have said “we haven’t done anything, yet.” Not only is Davis correct, but the United States House of Representatives is officially set to vote on what’s referred to on the street as The GOP Tax Bill or GOP Tax Plan. That piece of legislation contains a section that could kill the Raiders Las Vegas deal.

The part of the GOP Tax Plan, which is called the “Tax Cuts and Jobs Act”, that is of concern to the Oakland Raiders (as well as all of sport) is Sextion 3604.

As I wrote in my post on this from last week “Section 3604 mention and take direct aim at what are called “professional stadium bonds” and reads “any bond issued as part of an issue any proceeds of which are used to finance or refinance capital expenditures allocable to a facility (or appurtenant real property) which, during at least 5 days during any calendar year, is used as a stadium or arena for professional sports exhibitions, games, or training.” That effectively kills the very bond issue planned for the Oakland Raiders Las Vegas Stadium. Period.

There’s no guessing about the intent of that Section 3604 provision: it’s about as subtle, as Miami Dolphins Head Coach Don Shula might say, “as a punch in the face.” A tax exempt bond is commonly issued by a municipal government.”

A number of reports have said the GOP Tax Plan is coming for a vote before the U.S. House Of Representatives, but I can report that, according to the House Majority Leader, it’s coming up for vote this Thursday, November 16th.

What I wrote on November 8th still applies:

In the case of Las Vegas and the Oakland Raiders, and the law that spawned the NFL Stadium Plan, that public body is Clark County, Nevada. Under the “Tax Cuts and Jobs Act”, Clark County would be acting against the law in even meeting to consider doing the Raiders Bonds as the law, the Southern Nevada Tourism and Investment Act (SNTIA), instructs. Indeed, the entire part of the SNTIA would be rendered not legal if the GOP Tax Plan passes with Section 3604 intact.
And a restructured Raiders Bond would have to be what is called a “revenue bond” and issued by an entity other than Clark County. The Raiders Bonds could not be issued by Clark County, as that would be illegal, and would have to rely on revenue streams generated from the stadium itself. A new, private firm would have to be formed and that would have power to issue the Raiders Bonds. The Stadium Hotel Tax could still be used, but given it’s paltry 88-100ths of 1 Percent Rate, the revenue throw-off, already small, would be almost miniscule compared to the additional debt.
Trying to draw from the stadium revenue flows would quickly reveal that the Raiders already have a $27 million annual deficit in revenue from the stadium, and that’s because of the Bank of America Commercial Loan of $850 million for the stadium, and its debt burden on the stadium. Indeed, the SNTIA numbers from the meetings of the Southern Nevada Tourism and Infrastructure Committee show that such monies as event revenue were already estimated, so when you ‘park’ the Bank of America Commercial Loan into the spreadsheet, you come out $27 million in the hole – annually.
And that’s before GOP Tax Reform. With GOP Tax Reform, you have bond underwriters trying to dip into a stadium money source that was never really there. The $27 million stadium operating cost deficit would just grow to massive proportions in a correctly done spreadsheet.
And then there’s the construction subsidy bond for the $750 million.
According to conversations I’ve had with friends who are in the sports team financing business, the new interest rate for the private version of the Raiders Bonds would be around 9 percent, or greater. When I parked that higher rate into my Raiders Bonds Calculator, that added $2.393 million in monthly debt service costs, or $28.719 million in total annual debt service costs to the bond, coming to $861,572,693.20 over the 30-year bond debt service period.
Given that the current average monthly Stadium Hotel Tax Revenue that would go to the Raiders Bonds is $4.190 million, and the required Stadium Hotel Tax Revenue per month after passage of the GOP Tax Plan would be $9.052 million, it’s not hard to see that the stadium plan can’t be financed either by tax exempt bonds (because they’re not legal under the plan) or by Private Bonds given the giant debt service costs, far in excess of the current revenue stream and the small Stadium Tax Rate that caused it.
See ya Thursday.
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